GE 2015 Annual Report Download - page 220

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FINANCIAL STATEMENTS FINANCIAL INSTRUMENTS
192 GE 2015 FORM 10-K
FINANCIAL STATEMENT EFFECTS - FAIR VALUE HEDGES
(In millions) 2015 2014
Balance sheet changes 
Fair value of derivative increase (decrease) $ (151) $ 3,863
Adjustment to carrying amount of hedged debt (increase) decrease 75 (3,939)
Earnings (loss) related to hedge ineffectiveness (75) (76)
The effect of changes in market interest rates on the fair value of derivatives we use most commonly in fair value hedging
arrangements is presented below.
Interest rate forwards/swaps Interest rate increases Interest rate decreases
Pay floating rate/receive fixed rate Fair value decreases Fair value increases
Net investment hedges ± We invest in foreign operations that conduct their financial services activities in currencies other than the US
dollar. We hedge the currency risk associated with those investments primarily using short-term currency exchange contracts under
which we receive US dollars and pay foreign currency and non-derivatives instruments such as debt denominated in a foreign currency.
Under hedge accounting, the portion of the fair value change of the derivative or debt instrument that relates to changes in spot
currency exchange rates is offset in a separate component of VKDUHRZQHUV¶ equity. For example, an increase in the fair value of the
derivative related to changes in spot exchange rates will be offset by a corresponding increase in the currency translation component of
VKDUHRZQHUV¶ equity. The portion of the fair value change of the derivative related to differences between spot and forward rates, which
primarily relates to the interest component, is recorded in earnings each period as interest expense. As a result of this hedging strategy,
the investments in foreign operations of our financial services business are largely unaffected by changes in currency exchange rates.
The amounts recorded in VKDUHRZQHUV¶ equity only affect earnings if the hedged investment is sold, substantially liquidated, or control is
lost.
FINANCIAL STATEMENT EFFECTS - NET INVESTMENT HEDGES
(In millions) 2015 2014
Balance sheet changes 
Fair value of derivatives increase (decrease) $ 4,871 $ 5,192
Fair value of non-derivatives (increase) decrease (849) -
Shareowners' equity (increase) decrease (4,131) (5,741)
Earnings (loss) related to spot-forward differences (109) (549)
Earnings (loss) related to reclassification upon sale or liquidation(a) 4,547 88
(a) Included $4,549 million gain and $88 million gain recorded in discontinued operations in 2015 and 2014, respectively.
The effect of changes in currency exchange rates on the fair value of derivatives we use in net investment hedging arrangements is
presented below.
Currency forwards/swaps U.S. dollar strengthens U.S. dollar weakens
Receive U.S. dollars/pay foreign currency Fair value increases Fair value decreases
192 GE 2015 FORM 10-K